It is defined as the growth in the average income or consumption of the poorest 40 percent of the distribution in the population (the bottom 40).
It is examined by country rather than globally.
Introduced as one of two twin goals by the World Bank in 2013, along with ending extreme poverty, fostering shared prosperity embodies notions of economic growth and equity.
Irrespective of the prevalence of extreme poverty, this measure is meaningful as a gauge of how well prosperity is shared within each country.
The shared prosperity premium captures whether the bottom 40 are receiving a larger or smaller share of the overall pie.
The percentage of people living in extreme poverty (less than $1.90 a day) globally fell to a new low. In the 25 years from 1990 to 2015, the extreme poverty rate dropped an average of a percentage point per year – from nearly 36% to 10%. But the rate dropped only one percentage point in the two years from 11% in 2013 to 10% in 2015.
More recently, South Asia has made impressive inroads against extreme poverty, helping to reduce the global rate further. The number of poor in South Asia dropped to 216 million people in 2015, compared to half a billion
in 1990. Between 1990 and 2015, the world experienced a 25-percentage point drop in extreme poverty against a 35 percentage-point drop in South Asia. This decline in extreme poverty is much faster than in the rest of the world.
Extreme poverty is becoming more concentrated in Sub-Saharan Africa because of the region’s slower rates of growth, problems caused by conflict and weak institutions, and a lack of success in channeling growth into poverty reduction.
About half of the world’s countries now have poverty rates below 3 percent, but the report finds that the world as a whole is not on track to achieve the target of less than 3 percent of the world living in extreme poverty by 2030.
These contrasting regional poverty trends have two important implications: o First, the primary focus of the international community’s efforts to eliminate the worst forms of deprivation must remain firmly in Africa and those few other countries elsewhere with very high poverty rates.
Also, the plight of billions of people living above US$1.90, who are still very poor by the standards of their own societies, should be taken care of.
New Measures of Poverty
To expand the understanding of poverty as a complex, multifaceted problem and identify pockets of people who are impoverished but have remained unnoticed, the World Bank introduces new measures of poverty. The new measures can enhance policy dialogue, particularly in middle-income countries, where extreme poverty is less prevalent, but where the higher poverty lines and the new multidimensional poverty measure reveal there is still much work to be done.
1. A new multidimensional poverty measure: Similar to Global Multidimensional Poverty Index, it recognizes that access to education, health, electricity, water, sanitation, and physical and environmental security are critical for well-being.
It provides a global picture using comparable data across 119 countries for 2013 (representing 45 percent of the world’s population) combining consumption or income with measures of education and access to basic infrastructure services.
China and India are not a part of this exercise because of data availability.
2. New Poverty lines of US$3.20 and US$5.50 per person per day, expressed in 2011 PPP. The value of these lines is derived from the typical poverty line in lower- and upper-middle-income countries, respectively.
Why higher set of Poverty Lines? Majority of people and most of the world’s poor now live in middle-income countries. To reflect this shift and the rise in what may constitute basic needs for many people new measures are introduced. These higher-valued poverty lines reflect social assessments of what defines minimum basic needs in countries at these income levels.
Poverty estimates on new sets of Poverty Lines- Nearly half the world (46 percent) lives on less than US$5.50 per day. Sub-Saharan Africa leads with 84.5% of its population living under $5.5 a day followed
Why Societal Poverty Line (SPL)?
The introduction of this measure is based on recommendations of the Atkinson Commission on Global Poverty.
The majority of the world no longer lives in low-income economies. For many countries, the social relevance of the International Poverty Line (IPL) has lessened over time as their economies have grown. This is largely due to the observance that needs change as the world becomes richer.
As countries grow richer, uniformity in the consumption bundle may not result in the same level of well-being everywhere. Fixing the consumption bundle could result in unequal assessment of people across the world in terms of their ability to function in society in a socially acceptable manner.
What constitutes a basic need can vary depending on a country’s level of consumption or income. In a poorer country, for example, participating in the job market may require only clothing and food, whereas someone in a richer society may also need internet access, a vehicle, and a cell phone. The cost of performing the same function may differ across countries depending on their overall level of income.
The concept of poverty itself is dependent on one’s social circumstances. What is a luxury in one society could be a necessity in another. Even if minimum physical needs are met, people cannot be said to lead flourishing lives if they are not able to conduct themselves with dignity in the society in which they live.
The Societal Poverty Line (SPL) reflecting how monetary definitions of poverty at the national level vary with the overall income in a society. o What is Societal Poverty Line? The SPL is a combination of the absolute IPL and a poverty line that is relative to the median income level of each country. Specifically, it is equal in value to either the IPL or US$1.00 plus half of daily median consumption in the country, whichever is greater.
i. The value of the SPL will never be less than the IPL. But, after a certain point as countries get richer, the value of the SPL will increase as the consumption level of the median individual in that country increases.
ii. Although the SPL can change in real terms over time, it is constant in value across countries that are at the same level of median consumption or income. Because the SPL is constructed to reflect, on average, national poverty lines at different levels of median consumption or income, it provides a useful measure of global poverty that aligns well with national assessments of poverty.
iii. The proposed SPL is also relevant to SDG target 10.2 aimed at the social, economic, and political inclusion of all.
Poverty on the basis of SPL
i. Number of people who are poor stood at 2.1 billion as of 2015, .
ii. The percentage of societal poor in the global population has fallen steadily since 1990, but still at a much slower rate than the decline of extreme poverty. In 1990, the rate of societal poverty (45 percent) was about one-fourth greater than the rate of extreme poverty (36 percent).
4. Individual Level of poverty looking into intra-household inequality among various age-groups and gender.
The common approach assigns all individuals within a household to the same poverty status as the household. However, this masks potential differences in poverty among household members. Ignoring these decreases the effectiveness of common approaches to targeting poverty reduction interventions and the take-up of these interventions because they do not address the needs and constraints of the poorest individuals.
In the absence of poverty data on individuals, perceptions about differences in poverty by sex and age are rarely supported by evidence.
More reliable poverty estimates on individuals would facilitate a better understanding of the characteristics of poverty and its intergenerational transmission, the interventions appropriate for different types of individuals, and the more effective targeting of social protection and broader development programs. Such programs often rely on approaches targeted to households but may fail to reach potentially poor beneficiaries if many of these live in households not identified as poor.
Household composition, particularly the presence of dependents and the type of earners, influences gender differences in poverty over the life cycle.
Intrahousehold differences in consumption and poverty are widespread. In most cases, women and children are allocated a smaller share of the households’ resources than men.
The multidimensional poverty measure is de facto only partially individualized; only 30 percent of deprivations are measured among individuals. Multidimensional poverty is more prevalent among women than among men in all countries, with the largest gender gap in Iraq (54 percent versus 38 percent).
A significant gender gap in multidimensional poverty is also found in India.
Major observations on Individual level of Poverty
Women and children are often disproportionately affected by poverty, but with considerable variation across countries. Worldwide, 104 women live in poor households for every 100 men. However, in South Asia, 109 women live in poor households for every 100 men.
Women in poorer countries often withdraw from the labor force and lose their earning potential when they reach reproductive age. The gender gap in poverty rates is largest during the reproductive years when care and domestic responsibilities, which are socially assigned to women, overlap and conflict with productive activities. It is well documented that female labor force participation declines during women’s reproductive years, particularly if they have young children.
Resources are not shared equally within poor households, especially when it comes to more prized consumption items. Evidence also shows complex dynamics at work within households that go beyond gender and age divides. For example, a woman’s poverty level may be related to her position as mother versus wife of the household head.
Nearly one child in five lives in a poor household. Children are twice as likely as adults to live in poor households.
